Alibaba, Weibo set up U.S.-Asia IPO horse race

Two more Asia-based companies are opting to go public on U.S. exchanges

By

ChristinaRexrode

NEW YORK (MarketWatch) —The news that Weibo and Alibaba are going public is sure to set off the usual horse race between the New York Stock Exchange and the Nasdaq. But there’s another contest at play here too: U.S. exchanges versus their counterparts in Asia.

Weibo, China’s version of Twitter, is based in Beijing. E-commerce giant Alibaba is based in the eastern China city of Hangzhou. Both have announced that they will go public — on U.S. exchanges.

That is good news for the Nasdaq, owned by Nasdaq OMX Group Inc.,
NDAQ, +0.47%
and the New York Stock Exchange, owned by IntercontinentalExchange Group Inc.
ICE, -0.73%
Investors are hopeful that Asia’s giant and unsaturated consumer market will provide fertile ground for tech companies there that are looking to grow.

The U.S. exchanges are known to drum up the interest of Chinese companies with promises of transparency, a sophisticated investor base and deep capital markets. And for Alibaba, a disagreement with Hong Kong regulators may have also pushed the company toward the U.S. markets.

By some accounts, the U.S. exchanges’ welcome mat for Asia-based companies is working. Using data from Dealogic and Ipreo, the NYSE calculates that about 39% of IPO proceeds in 2013 were raised in the U.S., up from 15% in 2010. Asia’s fortunes, on the other hand, shifted the opposite direction: About 29% of global IPO proceeds came from Asia in 2013, down from 63% in 2010.

The listings can also be attention-grabbing once they’re public. Richard Peterson and Robert Keiser of S&P Capital IQ found eight instances where Chinese companies listed their IPOs on U.S. exchanges in the past year. By their calculations, five have more than doubled from their offering price, including the classifieds website 58.com Inc.
WUBA, +4.61%
and Sungy Mobile Ltd.
GOMO, -1.56%

Neither Alibaba nor Weibo has said which U.S. exchange it plans to list on.

Alibaba, in a brief announcement Sunday, did hint at a spat with Hong Kong. The company reportedly sparred with regulators there over corporate-governance issues, such as how board members are nominated. Alibaba’s executive chairman, Joe Tsai, told Reuters last week that his company wouldn’t “change our partnership structure just to accommodate a listing in Hong Kong - that’s never going to happen.”

A spokeswoman declined to elaborate.

John Fitzgibbon, founder of the research firm IPOScoop.com, was even more blunt. “If there’s a regulatory problem in Hong Kong,” he said, “why not come to New York?”

Others wondered if Hong Kong, anxious not to miss any more big deals, might rejigger its listing rules.

“I think there is still a chance that Hong Kong may relax its rules and Alibaba would go there, that they’re using this (announced) listing in the U.S. as a bargaining chip,” said Patrick Healy, CEO of the Issuer Advisory Group, which helps companies list on the exchanges. “There’s still a little game of cat-and-mouse going on here.”

To be sure, most tech companies that list on the U.S. exchanges are still overwhelmingly U.S. companies. Of 112 tech companies that have gone public on U.S. exchanges since the start of 2011, 86 were U.S. companies, including giants like Facebook Inc.,
FB, -1.18%
Twitter Inc.
TWTR, +0.38%
and Zynga Inc.,
ZNGA, +2.52%
calculates Ipreo, which is a market intelligence firm. Thirteen were Chinese companies, and another was based in Hong Kong, while the rest were scattered among the Netherlands, Luxembourg, and other countries. The biggest Chinese offering was the social networking site Renren Inc.
RENN, +0.84%
in 2011.

Even amid the supposed frenzy of Asia IPO listings, there’s still a significant element of buyer beware.

For example, looking at the 10 biggest IPOs of Asia Pacific-based companies that chose U.S. exchanges for their main listing, six are now trading below their IPO price, S&P Capital IQ’s Peterson and Keiser calculate. That includes the ballyhooed Renren.

And Weibo, which is registered in the Cayman Islands, with nearly all its operations in China, noted in its regulatory filing that an investor trying to bring a complaint against it under U.S. securities law would probably find a difficult path.

“Even if you are successful in bringing an action of this kind,” Weibo said, “the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.”

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